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| The upscale Corinthia Budapest is one of the many new hotels in Central and Eastern Europe. |
In what could well be called a defiance of the worldwide recession, hotel development has been progressing throughout Europe, and in some unexpected ways.
Where They’re Building
Major brands—notably luxury brands —are seeking out new cities for development and finding new ways to create and recreate hotels. For example, Four Seasons, which just revamped and renamed its flagship hotel on Park Lane in London, has a new property planned in Vienna as well as a second Central London hotel that will be part of the new Heron Tower, says Scott Woroch, executive vice president of worldwide development. The company wants a presence in Spain—Madrid and Barcelona are the best bets—as well as in Rome, Woroch adds. A major factor in choosing a location to develop a hotel is the city’s—or country’s—economy. “Poland is a country that is showing great strength right now, and so we’re looking at Warsaw,” says Woroch.
Russia is also on the Four Seasons list, with a hotel in St. Petersburg expected to open this year, and a Moscow hotel in development.
Staying with Russia, Starwood Hotels & Resorts expects to double its footprint there by 2013 with openings in St. Petersburg, Perm and Rostov-on-Don. This year, the brand will debut in Ukraine with the Four Points by Sheraton Zaporozhye. Four hotels will open in Turkey by the end of 2013, including the flagship Le Méridien Istanbul Etiler. Three Ws are slated to open this year in London, St. Petersburg and Paris. The Aloft brand debuted in Europe last year in Brussels and will be joined by the Aloft London Excel this fall. “We see a conversion opportunity of as many as 50 hotels in Europe for The Luxury Collection that we plan to aggressively target in the coming years,” says Bart Carnahan, senior vice president acquisitions and development, Starwood Hotels & Resorts Europe, Africa and Middle East (EAME).
IHG’s InterContinental brand has nine hotels in the pipeline for Europe—in London, Milan, Moscow, Marseille, Porto, Kittsee, Davos, Tbilisi and Belgrade—representing a mixture of new-builds and conversions, says Andrew Gill, IHG’s vice president, development for Europe. Of note, Eastern Europe is on IHG’s radar. “There is a need for branded hotels in significant growth markets such as Turkey, Russia, Ukraine and Poland,” he says. “In Moscow alone, there are roughly 9,000 international standard rooms, which is equivalent to around just 10 percent of the hotel rooms in London or Paris. Kiev has only six internationally branded hotels, four of which are ours.”
Fairmont Raffles International has two simple requirements for where it looks to develop. “Our criteria of project selections are ‘feet in the water,’ and answering positively to the question: ‘Would I go here on holiday with my family?’” says Francois Baudin, senior vice president, development. A year after The Savoy in London reopened under Fairmont and the Royal Monceau in Paris was unveiled with the Raffles tag, Fairmont is expanding development in Europe.
As with the other brands, Russia and outlying regions are high on Fairmont’s radar. The company has signed management agreements for properties in Kiev, Ukraine, and Baku, Azerbaijan. Both are under construction and will open by the end of this year or beginning of next year, says Baudin. Raffles has signed contracts for Moscow and Warsaw. Both projects are in the design phase and facing several challenges due to their historical, heritage buildings. Swissotel, a Fairmont brand, has management contracts for Kiev and Odessa; both the properties are under construction, with openings planned for 2013. The brand will soon have two management contracts for hotels in Sochi, Russia, where the winter Olympics will be held in 2014. “We will have one in the mountain and one on the beach,” Baudin says, which can swap staff depending on the season.
Some hotels started out in smaller markets and are only now expanding to the bigger cities. Tony Potter, CEO and managing director, CHI Hotels & Resorts, the operator of Corinthia Hotels, says that much of the brand’s focus has been on the British capital, where the Corinthia Hotel London will open this year in the building that once housed the Hotel Metropole. What next? “We have done well in Central and Eastern Europe,” he says. “Now we’re focusing on Paris, Rome and other major hubs. They generate high revenue.”
But Corinthia hasn’t abandoned Eastern or Central Europe. As the region grows in popularity, Potter says, the brand is checking out some other cities there. A hotel in Bucharest is already under development, and Prague is under consideration. “The market is smaller and the cities are smaller,” he says of the region. “What you’ll see as luxury hotels are not tiny boutiques, but 200-room properties instead of those with 500 rooms. You’ll see good development, but not very big hotels.”
A benefit of coming into gateway cities later in the game, he adds, is that other major brands may already have hotels in those destinations and travelers are looking for something new.
How They’re Building
Four Seasons’ Woroch notes that there is a specific challenge to building hotels in Europe: “Because of the density and the age of cities”—not to mention the lack of prime undeveloped land—“developers in Europe have to adapt and reuse.” That could mean transforming existing buildings into a hotel or upgrading existing hotels to brand standards. The Four Seasons Prague, for example, is a series of existing buildings that was converted for hotel use, and the Four Seasons in Florence is housed in a historical structure. The Four Seasons Hotel des Bergues Geneva, on the other hand, had been a hotel for years before joining the brand.
Using existing buildings instead of creating a property from scratch has its benefits, adds Woroch. “In developed cities, you can get a location in the city center, as opposed to a site that is available but not central.”
Renovating historical buildings, though, means protecting the architecture and working with preservation committees. Other problems with older buildings include antiquated systems that need to be replaced and structural quirks that are not immediately visible.
CHI’s Potter believes it is usually easier to convert an existing building rather than build from scratch. In London, for example, using a structure that was originally a luxury hotel in the 1890s and later used as an office building enabled Corinthia to keep the rooms spacious. “Had we been restricted as in other conversions, it wouldn’t have worked as a five-star hotel because clients are more discerning today.”
Potter says that there are four S’s that guests will pay for in a luxury hotel: Space, Size, Service and Style. From a development standpoint, there is a fifth S: Speed. Demolishing an existing structure to start from scratch takes longer than using the building’s framework, he notes.
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| Four Seasons’ London hotel has been revamped and renamed. |